iiNet, AFACT plot the way forward

Following his High Court victory today against Hollywood, iiNet CEO Michael Malone said that he would like to walk away from discussions with rights holders over the best way to deal with copyright infringement.

Following his High Court victory today against Hollywood, iiNet CEO Michael Malone said that he would like to walk away from discussions with rights holders over the best way to deal with copyright infringement.

iiNet's Steve Dalby (Credit: Josh Taylor/ZDNet Australia)

While waiting for the outcome of the High Court case between the Australian Federation Against Copyright Theft (AFACT) and internet service provider (ISP) iiNet, film studios and internet service providers have been holding a number of closed-door meetings with the Attorney-General's Department to try to develop a policy for dealing with online copyright infringement. However, following the High Court's unanimous ruling that iiNet was not in a position to act on infringement notices from AFACT, and therefore did not authorise its customers' copyright infringement, Malone said that he wants to walk away from those meetings.

"My preference would be to walk away now," he said.

Yet, iiNet's chief regulatory officer Steve Dalby said it is important that iiNet still participate, to ensure that its views are heard.

"The reality is, I'd much rather be in those meetings putting forward our point of view and arguing from our perspective than for us to be sitting on the outside waiting for someone else to hand to us a fait accompli," he said.

Malone said he believes that there would probably need to be a change to the Copyright Act in order to deal with online copyright infringement, because he said he doesn't think that the ISPs and the rights holders would ever agree on one single code.

"I don't think a code is going to get us there, because we're too far apart. Now, that may have changed with the results of this High Court case, but the studios seem to be unwilling to provide us with indemnities or pay us to enforce their rights," he said.

However, Dalby said that he thinks the rights holders could still get the outcome they want under the current Copyright Act, in terms of seeking court orders to get evidence from ISPs, and that he wouldn't want to see new regulations introduced to deal with copyright infringement in the internet industry.

"We've probably already got the most highly regulated industry in the country. We've got regulators in every state. We've got national regulators, but also regulators coming at us from different sectors. We wouldn't like to see more regulators. We would really see additional regulation as too cumbersome."

Australia isn't the first country to struggle with copyright infringement. The UK, New Zealand and the US have also had to grapple with copyright issues.

Malone said that the US model, developed by rights holders and five major ISPs, where warnings are issued before throttling or blocking a user's internet use, is not a model that iiNet favours, because there is not enough judicial oversight for its implementation. He said that there is still some disagreement about that system, and that not a single notice has been sent yet.

Dalby said that if AFACT wants a US-style model, then the company needs to present its framework to the public, not just in closed-door meetings with ISPs and the government.

"Let's get real, let's put a document on the table that specifies what the rights holders want to see from the Australian telecommunications industry," he said.

AFACT managing director Neil Gane said in a press conference today that there is a possibility that the closed-door discussions would continue following the ruling, but he indicated that AFACT would push for a change in legislation.

"We'd look to propose some sort of legislative fix, in which appropriate action could be taken to deter peer-to-peer infringements that are occurring across Australia," he said.

He said that the disagreements with ISPs over their proposals for dealing with piracy are about how effective AFACT believes the proposals would be, and how much they would cost the rights holders, but he said that a voluntary code is AFACT's preferred solution.

AFACT's Neil Gane (Credit: Josh Taylor/ZDNet Australia)

"A voluntary framework is not only the most effective and proportionate because it is agreed on by both parties, not by government, but it is also the fastest to put in place," he said.

AFACT does not propose a solution that would see users disconnected from their internet service, he said, and nor does it favour suing individual users.

"iiNet has repeatedly recommended ... that the preferred approach is we sue their customers. We've always maintained that we prefer a more proportionate and effective approach, which is for ISPs to notify their customers when copyright infringements are occurring across their accounts," he said.

"I can say at the current stage ... we have no plan to sue end users in Australia."

Malone said that the case was very stressful for him personally, and that ahead of the judgment being handed down this morning, no one in the iiNet offices in Perth looked like they had slept. iiNet will get back approximately $6 million of the $9 million in legal costs that it incurred as a result of this case. He pointed out the futility of having the parties spend $20 million in total on the case, which did not prevent one single download.

Malone said that the High Court ruling provides clarity for ISPs; it outlined that they don't have to be the investigator, judge and jury on their users' copyright infringement. However, it also stated that copyright infringement isn't just going to go away, and ISPs need a clear set of rules from the government or an industry code on their responsibilities.

"All we want is a very clear rule book. We would follow the rules as we are required to do, and we think that would require government intervention," he said

As a self-professed Game of Thrones tragic, iiNet's Malone said it pains him to be waiting for the new episodes to come up on iTunes while they are already available through BitTorrent. He said that rights holders would be able to resolve most of the problem by making the content available in a timely, high-quality and affordable fashion, but that film studios have yet to see this.

"Rights holders start with a world view that every human being on this planet is evil and just wants to steal their content. That's just not a legitimate position. The reasons people are trying to steal their content is because they can't get access to it any other way," he said.

Gane said that rights holders have worked in Australia to make their content more easily available online.

"The film and TV industry have always seen the internet as a medium of enormous potential to our business. Currently, there are more than 20 online business models that makes rights holders' content available to the Australian public."

He said that as ISPs look to monetise content, it is in their best interest to protect the content, too.

"Commerce can only take place in a free market economy, not a free-for-all economy. There is no business model in the world that can compete with free."

Read on for further reactions.

The Communications Alliance supported iiNet as a "friend of the court" in the case, and proposed a notification scheme to educate users in an attempt to stem piracy. It has now said that today's decision provided "welcome clarity" for ISPs, and has provided required impetus to complete discussions that started last year with rights holders and government on how the industry could help prevent copyright infringement.

"We hope that the High Court judgment will help us accelerate the process of agreeing with rights holders the basis for an industry-led scheme that will discourage copyright infringement, appropriately protect customers' rights and benefit the industry as a whole," Communications Alliance CEO John Stanton said.

When he heard that AFACT CEO Neil Gane had called for the government to step in and address legislation so that it could better protect copyright owners against peer-to-peer networks, Stanton said, "I think that's a bit unfortunate, given the good faith work," referring to the discussions striving towards an industry-led scheme.

Derek Whitehead, chairman of the Australian Digital Alliance, a peak body representing copyright users, also noted that although the High Court left open the possibility of a targeted legislative scheme to address file-sharing issues, steps in that direction have to be made carefully, taking into account the needs of consumers, as well as those of ISPs and copyright holders.

"A fundamental issue to be taken into account in any legislative or industry response is the lack of legitimate content available to consumers in Australia. More needs to be done to make content available in an affordable and accessible way."

Stanton said that the court had noted the fact that it is possible to address the issues with cooperative industry agreements, such as the industry-led scheme that is already under discussion.

"If they use that judgment as an opportunity to get changes to the law, that's unfortunate," he said.

The Pirate Party also welcomed the decision.

"I am sure it comes as no surprise to anyone that we welcome this ruling," Brendan Molloy, secretary of the Pirate Party Australia, said in a statement. "We reiterate that ISPs behave similarly to the postal service — they are the carriers of the message, and that message should remain private. It is not their business to police users, but merely to comply where necessary with authorities. ISPs are not, and should never be, responsible to anyone other than their subscribers and local law-enforcement agencies."

However, it is concerned that the discussions that the Communications Alliance is taking part in do not have consumers' best interests at heart.

"We have continually protested against the closed-door meetings conducted by the Attorney-General's Department, in which industry representatives are given priority and the public are ignored. The citizens of Australia are being refused participation in the 'piracy debate', when they should be the most vocal of concerned parties. Copyright is not just an issue for rights holders and service providers — the voice of the public must be given priority above all else."

Whitehead is just as adamant that consumers have a place in the creation of any industry-led scheme.

"Consumers should be included in these discussions, because consumers, as end users of copyright material, stand to be greatest affected by any legislative or industry outcome," he said.